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Urban Outfitters Inc - Stock Quote URBN

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Morningstar's Urban Outfitters Inc Stock Analysis

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Expense Woes Had the Expected Impact on No-Moat Urban Outfitters’ Q4 Earnings; Shares Undervalued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

As forewarned in its Jan. 11 and Feb. 10 announcements (see our notes), no-moat Urban Outfitters badly missed our profit expectations in fiscal 2022’s fourth quarter despite in line sales. Specifically, its 27.6% gross margin was 340 basis points below our forecast due to higher delivery and logistics expenses that could not be fully offset by price increases. Thus, although its selling, general, and administrative margin of 23.6% basically matched our forecast, its operating margin came in at just 4%, down from 5.7% two years ago (prepandemic) and well short of our 7.3% estimate. Even so, Urban Outfitters recorded 14.2% sales growth in the fourth quarter as compared with two years ago, and now expects first-quarter sales growth in the mid- to high-teens in the first quarter, suggesting that underlying demand remains high. Therefore, given this momentum, and our rescission of our prior expectation of a higher U.S. corporate tax rate, we expect to lift our $35.50 fair value estimate by a mid-single-digit percentage and view Urban Outfitters’ shares as attractive.

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Urban Outfitters Inc's Company Profile

Business Description

Founded in 1970, Philadelphia-based Urban Outfitters is an apparel and home goods retailer that operates about 700 stores and e-commerce in North America and Europe under the Urban Outfitters, Free People, FP Movement, Anthropologie, Terrain, and BHLDN brands. It also sells products through a wholesale operation, owns some restaurants, and operates a clothing rental business. Urban Outfitters primarily markets to young adults and offers products in categories such as women’s and men’s apparel, home goods, shoes, wedding, and outdoors.

5000 South Broad Street
Philadelphia, PA, 19112-1495
T +1 215 454-5500
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Jan 31, 2022
Fiscal Year End Jan 31, 2023
Stock Type Cyclical
Employees 23,000

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